Pronova Deal Is Healthy Step for BASF

By Nicky Redl

In addition to being the world’s largest chemical company by sales, Germany’s BASF will become the leading producer of concentrated omega-3 fatty acids once it’s gulped downPronova BioPharma.

By expanding into the market for omega-3 fatty acids used in health care, BASF is following its strategy of reducing its dependence on classical chemicals.

BASF will pay Pronova’s shareholders NOK12.50 (US$2.18), equivalent to about €515 million ($659 million), an advantageous price for a sensible acquisition, analysts said.

“Due to this acquisition BASF should become the leading producer in the fast growing market for concentrated omega-3 fatty acids and cover the entire range of the omega-3 fatty acids,” analyst Nadeshda Demidova of Equinet Bank said.

BASF has commitments for about 60% of Pronova’s share capital.

Lars Hettche at Bankhaus Metzler sees the takeover offer as a positive step, noting it doesn’t look too expensive and that Pronova’s earnings margin last year was high, at around 40%.

While one trader says the acquisition is too small to cause much of a share price reaction, he agrees that the purchase price is fairly low considering Pronova’s turnover of around €230 million last year, with after-tax profits coming in at just over €20 million.

Late last year BASF said it wanted to reduce the percentage of sales generates from classical chemicals to around 30% by 2020, thereby increasing its foothold in core industries such as agriculture, construction, consumer goods, health and nutrition, electronics, energy, resources, and transportation.

In January, board member Michael Heinz said BASF aims to expand specialty chemicals for consumer-related industries through both acquisitions and organic growth.

Peter Spengler of DZ Bank believes Wednesday’s offer fits well into this strategy. “BASF is rather focusing on technology, research and development, as well as high margins, instead of high sales,” Mr. Spengler said, with regard to the company’s acquisition choices.

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